Lending an Ear

A business owner's guide to finding the right loan ... and the right loan officer

Lisa Jones

The Big Banks

Cincinnati's largest banks and lending institutions:

"¢National City Corp.

"¢Fifth Third Bancorp

"¢US Bank

"¢PNC Bank

"¢First Financial

"¢Huntington Bank

"¢Bank One

"¢KeyBank

Hire to your weakness "” it's an age-old adage that serves business owners well. Yet a company's commander-in-chief needs more than employees who complement a skill set. He or she needs a team of outside advisers that includes attorneys, accountants, insurance professionals, and, perhaps most importantly, bankers.

Banks make the business world go 'round with scores of lending options. The trick to building a mutually beneficial relationship is first identifying a bank with services that meet a business owner's needs and, second, identifying an individual within that bank who is eager to join and even coach the team when necessary.

Steven Emerson is the Cincinnati district president for KeyBank. In his experience, the borrowing needs of a business are determined by factors above and beyond its size. The type of industry and the preferences of the business owner play a large role in the lending relationship. The right banker not only recognizes individual needs but also caters to them.

"The industry has changed over the last 15 years," Emerson notes. Once upon a time, "the big companies of the world would get a team of bankers who serviced their account. Small companies didn't. They would walk into a branch and deal with a consumer banker who had minimal experience and training in business."

Today there are more options and services available to all businesses, regardless of size, according to Emerson.

"It comes back to having a banker who is well trained, understands what it means to deliver service to a small-business owner and understands what they need to be successful," Emerson says. "Unless we have conversations with the business owners, we'll be reactionary instead of proactive."

When seeking out startup funds, po-tential business owners should remember that their long-term interests are best served by establishing themselves with banks capable of growing with them. Some local banks may do this as well, if not better, than regional or national institutions. What's fundamental is that both the banker and business owner see beyond the first loan.

"You need to be upfront with a banker because the one thing the business owner doesn't want to do is find a bank comfortable making the first loan but not the second or third loan," observes Patrick J. Hart, executive vice president of First Financial Bank, which boasts the No. 1 market share among banks in fast-growing Butler County. "The first idea is to get a loan to start the business, but in three to five years if you plan to buy the building you are renting, it's good to share that information with your banker because they can help get you there. It will help that business owner to understand early what the expectations of the bank are going to be. If and when he comes for that commercial real estate request, no one will be surprised what the bank's requirements will be."

According to Hart, business owners benefit immensely from long-term lending relationships. Good loan officers should be seen more like partners plotting a course than a wealthy aunt you hit up every few years when it's time to raise funds.

"Those financial institutions that have success lending to business owners are doing it because they're getting out of their offices, because they're getting to know the business owners and their needs," Hart says.

One case in point is Matandy Steel and Metal Products LLC. As a steel service center, true success lies in Matandy's ability to buy materials when the price is right. An ever-evolving relationship with First Financial and, consequently, an ever-growing line of credit, make this possible.

"Our first line [of credit] with them was enough to get us going "” or get me going because I was a one-man show," says company President Frank Pfirman. "My No. 1 goal was to educate the bank about what Matandy Steel was doing and where we were going."

Seventeen years and 50 employees later, Matandy Steel is now one of First Financial Bank's largest customers, according to Pfirman. Regular meetings supplemented an annual review, and "” over time "” the banking/business relationship became rock solid with increased lines of credit and supplemental lending to take advantage of inventory opportunities when they presented themselves.

"The fact that they took a chance on me early on endeared them to me," Pfirman said. "Now other banks are calling and wanting to do business, but we want to stay with First Financial."

Comparing services is vital in the CEO's thought process toward choosing a lender. "If you are Procter & Gamble, your bank is not the corner savings and loan," says Doug Cleaves, senior vice president and manager of commercial banking for PNC Financial Services Group Inc. "So it's important that a business owner knows enough about banking to make sure they have the right matchup, that they're aligned with someone who can service them the way they want to be serviced."

Whether your company is large or small, much comes down to personal preference. Pfirman cites direct access to decision makers as one benefit of banking locally. However, that wasn't the case with one of Cleaves' early customers.

"Some business owners out there think bankers are a necessary evil," Cleaves says. "When I was 24 years old, I was thrown out on the street to do a job and I met this great businessman. ... He said, 'If I never see you again, you'll be the best banker I've ever met.' "

Still others prefer constant communication, like one business owner who emails Cleaves his financial statement every month.

"If they want a nonrelationship with their bank, they should find a bank that wants to act that way, too. If not, they should find a bank with a similar philosophy," Cleaves suggests, noting that regular performance reviews and goal assessment benefits everyone.

Above all, it's not about obtaining the lowest interest rate. "At the end of the day, it's not the lowest rate with the least amount of conditions," Hart says, noting that business owners should find out if the bank has a track record of working with others in similar industries both through the good times and less-than-profitable times.

Good corporate citizenry also trumpets a bank's connection to the businesses and community it serves.

"We believe it to be one of the most important things we do," Hart says, "because it's paying back from where we are risking our profits and it's good business sense."